A Firm Is Considering Purchasing an Asset That Will Cost

question 56

Multiple Choice

A firm is considering purchasing an asset that will cost $5 million.Other depreciable costs include $800,000 in installation costs.If the asset is classified in the 5-year class,what is the annual depreciation for years 1,3,and 6 for this asset,using the fixed depreciation percentages given by MACRS? (The percentages are 20.00%,19.20%,and 5.76%,respectively.)

• A)$1,856,000,$1,113,600,and $334,080 for years 1,3,and 6,respectively
• B)$1,160,000,$1,113,600,and $334,080 for years 1,3,and 6,respectively
• C)$1,160,000,$1,113,600,and $668,160 for years 1,3,and 6,respectively
• D)$5,800,000,$1,160,000,and $1,113,600 for years 1,3,and 6,respectively

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Definitions:

Perfect

To bring something to a state of completeness or flawlessness; in legal and financial contexts, to finalize or make an action legally binding.

Collateral

An asset offered to secure a loan or other credit, which can be seized by the lender if the loan is not repaid.

Automatic-Perfection Period

A specified timeframe following the attachment of a security interest during which the interest is considered perfected without filing.

Perfected

In legal and financial contexts, refers to having completed all necessary legal steps to enforce rights regarding a security interest against third parties.